Infosys: Too Good to Change?

The exit of TV Mohandas Pai, Infosys media savvy director, and his subsequent interviews to media claiming that Infosys has decided to go by only seniority while choosing the candidates for the top post, has suddenly opened the floodgate. Would Mohandas Pai have been a better CEO than SD Shibulal? Is there a divide among Infosys founders on the choice for the top job? Did NR Narayana Murthy actually prefer Pai over Shibulal? Did he feel that Pai was more competent than Shibulal, but finally backed the latter as Pai does not share the same values as the founders?

Too many questions. All focused on the here and the immediate. That is how the media and analysts have seen and evaluated Infosys all these years. Ironically, that is how Infosys has seen itself. While the founder chairman Narayana Murthy may say he does not understand how stock markets operate, the company has always played to the analysts galleryespecially in India. Operating marginthe top metric for India based analystshas been the sacrosanct number for the company.

In other words, the focus has always been on present. Sometimes, at the cost of the future. So while revenue growth figures have changed keeping with the external market conditions, Infosys has never allowed the operating margin to fall below the 28% figure. Even if that means being slow on the domestic foray. Even if that means not letting grow new lower margin businesses like BPO grow beyond a certain share of the business. Even if that means shying away from acquisitions.

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In short, it has chosen profitability over growth. As some critics put it, present over the future.

Every step that Infosys has taken has been to protect that margin. Derisking has been its stated strategy. The choice of CEO too is part of that strategy: it is not seniority, it is not lack of shared valuethey may well be some of the explicit statementsit is that derisking that has guided its principle. Well, Shibulal probably is a safer bet than Pai. But the bigger question was: Why was the choice restricted to these two? Pai may not be a founder and may be a little younger than Shibulal. But he too was too much part of the system. Look at TCS, on the other hand. It actually groomed N Chandrasekaran for the role. Wipro did that a little late. But choosing Kurien over the old-timers, Wipro mandated change. Neither Chandrasekaran nor Kurien were outsiders. Chandrasekaran started in TCS 24 years back and Kurien has been in Wipro for more than 10 years, and has successfully transformed Wipro BPO. But they were contrasts to the person/s that they were replacing. That was change. Neither Pai nor Shibulal fit that description for Infosys.